ECO 101 Lecture Notes - Lecture 2: Maimonides, Sunscreen, Southwest Ohio Regional Transit Authority
Document Summary
Scientific method: develop models of the world (hypothesis, test hypothesis, or model, using data + repeat. Models- a simplified description of the real world. Example: investing one year in education increases future earning by 10% 2 years of education causes income to increase by 1. 10 x 1. 10= 1. 21 or 21% increase. 4 years of education causes income to increase by (1. 1)^4= 1. 46 or 46% increase. Hypothesis- prediction that can be tested completing college increases income by 46% relative to those with only a high school degree. 48530/30000 = 1. 618 which makes the return to ba 61. 8% Therefore the return to education would be 12. 78% Crime and police are positively correlated, however there is also reverse causation. Correlation- there is an observed relationship between two things. Randomized trials- sort participants into control and treatment groups at random, and look for different outcomes between two groups.
